IRS Releases Governance and Tax-Exempt Organization Training Materials

The IRS has released materials used during a series of two-hour training sessions on governance and tax-exempt organizations. The sessions were part of a continuing professional education program for Exempt Organizations examination agents, determinations specialists, tax law specialists and managers (TAXDAY, 2009/06/09. I.1). The materials, which are available on the IRS website at http://www.irs.gov/charities/article/0,,id=208454,00.html, include course outlines, presentation materials, excerpts from the Internal Revenue Manual, policies and practices related to governance of 501(c)(3) organizations and selected portions of Form 990 and its instructions.

Proposed Regulations Released on Issuance of Taxpayer Assistance Orders (NPRM REG-152166-05)

The IRS has released proposed regulations on the issuance of Taxpayer Assistance Orders (TAOs) by the National Taxpayer Advocate (NTA) to reflect legislative changes and to provide updated guidance on the administration of TAOs. The regulations are generally effective for TAOs issued on or after the date the final regulations are published. Code Sec. 7811 authorizes the NTA to issue a TAO when a taxpayer is suffering or about to suffer a significant hardship as a result of the manner in which the internal revenue laws are being administered by the IRS. A TAO may be issued by the NTA regardless of whether a taxpayer has submitted an application with the NTA on Form 911, Request for Taxpayer Advocate Service Assistance (And Application for Taxpayer Assistance Order).

The proposed regulations provide guidance on what constitutes significant hardship, including specific guidance with regard to the 30-day delay standard. However, a finding by the NTA that a taxpayer is suffering or about to suffer a significant hardship will not automatically result in the issuance of a TAO. The NTA must make a separate determination that the facts and law support relief. If and when a TAO is issued, it acts as an order directing the IRS to either cease any action or take any action under any provision of the internal revenue laws within a specified time. The IRS must comply with the TAO unless it is appealed and then modified or rescinded by the IRS Commissioner, IRS Deputy Commissioner, or the NTA. The TAO may be issued to an office, operating division or function of the IRS, as well as any private collection agency working under contract with the IRS. However, a TAO cannot be issued to the IRS Criminal Investigation (CI) division if the CI division reasonably determines that the TAO would impede its investigation of the taxpayer.

Proposed Regulations, NPRM REG-152166-05, 2009FED ¶49,424

Other References:

Code Sec. 7811

CCH Reference - 2009FED ¶43,308A

Tax Research Consultant

CCH Reference - TRC IRS: 3,058.05

TRC IRS: 30,220

CCH Reference - TRC IRS: 45,112.20

CCH Weekly Report from Washington, D.C.

The Senate is expected to wait until September to take up health care reform legislation. President Obama, who had called for its passage before the August recess, said that he had no problem with this delay as long as work continued during the recess. PAYGO legislation passed the House, but the Senate may not take up the measure. The IRS reminded taxpayers of the temporary tax incentives in the American Recovery and Reinvestment Act of 2009 (2009 Recovery Act) (P.L. 111-5) and finalized filing rules for small exempt organizations. On the international front, the IRS announced that it intends to issue guidance for individuals receiving gifts and bequests from expatriates and a Treasury Department official said that negotiating tax treaties is a priority.

Legislation

Senate Majority Leader Harry Reid, D-Nev., said on July 23 that the Senate will wait until September to take up health care reform legislation, but he expects that the Senate Finance Committee will mark up its bill before August 7 (TAXDAY, 2009/07/24, C.2). Reid said the delay was in response to numerous complaints from Republican lawmakers that leadership is moving too quickly to pass complex legislation that would have far-reaching impact. Baucus hopes to mark up his health care overhaul during the week beginning August 3, just day days before the Senate leaves for a month-long recess. Baucus continues to hold meetings with a group of six bipartisan members of the Committee who are negotiating the bill. House lawmakers on July 22 voted 265-to-166 to approve the Statutory Pay-As-You-Go Bill of 2009 (2920) (TAXDAY, 2009/07/23, C.1). Under PAYGO, lawmakers would be required to fully offset any new mandatory spending or tax cuts so that the budget deficit will not increase. The Senate may not take up the measure as Senate Budget Committee Chairman Kent Conrad, D-N.D., has said he opposes the bill over concerns about exemptions and the possibility of relinquishing control of budget baselines to the White House.

President Obama dropped his call for both House and Senate passage of health care reform legislation by the August recess after Senate Majority Leader Harry Reid, D-Nev., announced that the Senate would not be able to meet the president's deadline. Obama said he had no problem with the delay as long as work continued diligently during the month-long recess (TAXDAY, 2009/07/24, C.2). The president said his target date for a final package to reach his desk is the fall.

Obama began to weigh in on some of the financing options passed by the House Ways and Means Committee and under consideration by the Senate Finance Committee, suggesting that a House proposal to impose a surtax on wealthy households meets his general principle to not raise taxes on the middle class. He also expressed interest in proposals under consideration by the Senate tax-writing panel to cap the tax exclusion for high-end health insurance plans and penalize insurance companies that provide the so-called Cadillac, gold-plated coverage. He stressed he does not support eliminating the tax break altogether and opposes taxing health care benefits on anyone already receiving them (TAXDAY, 2009/07/24, W.1).

IRS/Treasury

Exempt Organizations. Final regulations detail which small exempt organizations must file Form 990-N, Electronic Notice (e-Postcard) for Tax-Exempt Organizations Not Required To File Form 990 or 990-EZ (T.D. 9454, TAXDAY, 2009/07/23, I.1). The IRS declined to exclude small exempt organizations that have little or no income.

Recovery Act. Many of the tax incentives in the 2009 Recovery Act (P.L. 111-5) are temporary; therefore, the IRS encouraged taxpayers to take advantage of them before they sunset (IR-2009-67; TAXDAY, 2009/07/21, I.1). The IRS highlighted the deduction for state and local sales taxes of qualified new vehicle purchases, energy tax incentives, the American Opportunity Tax Credit, the first-time homebuyer credit, and the Making Work Pay Credit.

Gifts and Bequests. The Heroes Earnings Assistance and Relief Tax Act of 2008 (P.L. 110-245) added new filing and reporting requirements on individuals who received gifts and bequests from expatriates. The IRS announced that it intends to issue guidance in this area (Announcement 2009-57, TAXDAY, 2009/07/20, I.1).

Tax Treaties. A Treasury Department official said on July 23 that the U.S. is anticipating updating some existing tax treaties and negotiating more tax information exchange agreements (TAXDAY, 2009/07/24, T.1). Treasury International Tax Counsel John Harrington relayed that recent agreements with Luxemburg and Switzerland have focused on information exchanges, rather than resolving all issues.

Return Preparers. The IRS invited tax professionals and consumers to comment on its review of return preparers (IR-2009-68, Notice 2009-60; TAXDAY, 2009/07/27, I.7). The IRS is holding the first in a series of nationwide public meetings in Washington, D.C. on July 30 (IR-2009-66; TAXDAY, 2009/07/15, I.1).

Tax Tips. The IRS launched its "Summertime Tax Tips" with tips for job seekers, new business owners, recently married couples, students with summer jobs, and members of the U.S. Armed Forces (TAXDAY, 2009/07/22, I.2.; TAXDAY, 2009/07/23, I.4). The IRS also reminded taxpayers that its website offers many explanations and materials in Spanish.

By Jeff Carlson, Paula Cruickshank and George L. Yaksick, Jr., CCH News Staff

Ohio --Property Tax: Constitutional Challenge to Property Classification Allowed

The Ohio Supreme Court denied the Tax Commissioner's motion to dismiss an appeal challenging the constitutionality of a classification system used to administer a 10% property tax reduction for business property. In determining that a property is intended primarily for use in a business activity, the statute and administrative rules allow the 10% reduction for properties improved with one- to three-family dwellings but deny it for properties with dwellings for four or more families. The taxpayers appealing the classification system argued that the classifications violate the uniformity and equal protection clauses of the state constitution.

The commissioner asserted that the taxpayers' appeal should be dismissed because the Board of Tax Appeals' (BTA) rule-review proceeding, which is the basis of the taxpayers' appeal, was an improper foundation on which to challenge the classification system because it was quasi-legislative, could not be used to challenge a statutory classification, and was not ripe for appeal. In rejecting the commissioner's arguments, the court found that an unconstitutional classification in an administrative rule makes that rule by definition unreasonable and, therefore, both ripe for appeal and a proper basis to challenge the constitutionality of the underlying statute. The court also rejected the commissioner's characterization of the BTA's rule review as quasi-legislative. Lastly, the court found that the taxpayers sufficiently specified the claimed errors to avoid dismissal.

Other References:

Explanations at ¶20-070